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Gold as inflation and exchange rate hedge: The case of India

Amrendra Kumar () and Vikash Gautam ()
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Amrendra Kumar: Head of Risk Management, Statkraft Markets Private Limited

Economics Bulletin, 2017, vol. 37, issue 2, 1168-1175

Abstract: For a long part of the recorded past, gold has served as the basis of the monetary system and therefore, it was a prominent choice as currency risk hedge. In recent years several alternatives of gold have emerged. The use of gold vis-Ã -vis other alternatives, in hedging against currency risk, depends on whether gold occupies a considerable position in the hedging portfolio. We use monthly observations on gold prices, inflation and exchange rate from April 1993 to June 2016 to test this hypothesis. The results show that gold is an effective hedge only against the unexpected part of the exchange rate, although it is not so completely.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2017-05-25
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